ITEM 1. FINANCIAL STATEMENTS
Con-way Inc.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2014
|
|
2013
|
(Dollars in thousands)
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash and cash equivalents
|
$
|
498,792
|
|
|
$
|
484,502
|
|
Trade accounts receivable, net
|
688,353
|
|
|
575,013
|
|
Other accounts receivable
|
50,130
|
|
|
51,063
|
|
Operating supplies, at lower of average cost or market
|
25,280
|
|
|
23,910
|
|
Prepaid expenses and other current assets
|
59,426
|
|
|
57,961
|
|
Deferred income taxes
|
23,598
|
|
|
15,332
|
|
Total Current Assets
|
1,345,579
|
|
|
1,207,781
|
|
|
|
|
|
Property, Plant and Equipment
|
|
|
|
|
|
Land
|
192,070
|
|
|
193,364
|
|
Buildings and leasehold improvements
|
855,274
|
|
|
856,038
|
|
Revenue equipment
|
1,864,453
|
|
|
1,857,737
|
|
Other equipment
|
350,554
|
|
|
353,205
|
|
|
3,262,351
|
|
|
3,260,344
|
|
Accumulated depreciation
|
(1,633,930
|
)
|
|
(1,603,511
|
)
|
Net Property, Plant and Equipment
|
1,628,421
|
|
|
1,656,833
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
Deferred charges and other assets
|
32,808
|
|
|
32,200
|
|
Capitalized software, net
|
22,285
|
|
|
21,488
|
|
Employee benefits
|
15,688
|
|
|
15,018
|
|
Intangible assets, net
|
7,462
|
|
|
8,640
|
|
Goodwill
|
337,973
|
|
|
337,971
|
|
|
416,216
|
|
|
415,317
|
|
Total Assets
|
$
|
3,390,216
|
|
|
$
|
3,279,931
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Con-way Inc.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2014
|
|
2013
|
(Dollars in thousands, except per share data)
|
(Unaudited)
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
Current Liabilities
|
|
|
|
Accounts payable
|
$
|
402,604
|
|
|
$
|
390,537
|
|
Accrued liabilities
|
247,769
|
|
|
229,078
|
|
Self-insurance accruals
|
115,534
|
|
|
105,063
|
|
Short-term borrowings
|
2,388
|
|
|
1,588
|
|
Current maturities of capital leases
|
27,435
|
|
|
19,685
|
|
Total Current Liabilities
|
795,730
|
|
|
745,951
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
Long-term debt
|
719,228
|
|
|
719,155
|
|
Long-term obligations under capital leases
|
9,527
|
|
|
16,185
|
|
Self-insurance accruals
|
141,989
|
|
|
142,307
|
|
Employee benefits
|
206,477
|
|
|
240,171
|
|
Other liabilities and deferred credits
|
38,827
|
|
|
39,524
|
|
Deferred income taxes
|
267,844
|
|
|
237,949
|
|
Total Liabilities
|
2,179,622
|
|
|
2,141,242
|
|
|
|
|
|
Commitments and Contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
Common stock, $0.625 par value; authorized 100,000,000 shares; issued 65,269,344
and 64,592,756 shares, respectively
|
40,781
|
|
|
40,349
|
|
Additional paid-in capital, common stock
|
677,278
|
|
|
653,487
|
|
Retained earnings
|
1,092,867
|
|
|
1,043,472
|
|
Cost of repurchased common stock (7,755,426 and 7,669,889 shares, respectively)
|
(332,530
|
)
|
|
(329,088
|
)
|
Accumulated other comprehensive loss
|
(267,802
|
)
|
|
(269,531
|
)
|
Total Shareholders' Equity
|
1,210,594
|
|
|
1,138,689
|
|
Total Liabilities and Shareholders' Equity
|
$
|
3,390,216
|
|
|
$
|
3,279,931
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Con-way Inc.
Statements of Consolidated Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(Dollars in thousands, except per share data)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue
|
$
|
1,492,349
|
|
|
$
|
1,381,370
|
|
|
$
|
2,861,192
|
|
|
$
|
2,717,534
|
|
|
|
|
|
|
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and employee benefits
|
561,073
|
|
|
539,556
|
|
|
1,098,325
|
|
|
1,057,397
|
|
Purchased transportation
|
368,658
|
|
|
329,021
|
|
|
701,643
|
|
|
677,544
|
|
Other operating expenses
|
157,510
|
|
|
147,117
|
|
|
319,746
|
|
|
304,814
|
|
Fuel and fuel-related taxes
|
130,802
|
|
|
135,547
|
|
|
267,504
|
|
|
272,959
|
|
Depreciation and amortization
|
60,848
|
|
|
57,235
|
|
|
120,459
|
|
|
113,163
|
|
Purchased labor
|
42,334
|
|
|
34,045
|
|
|
84,554
|
|
|
62,027
|
|
Rents and leases
|
34,399
|
|
|
31,136
|
|
|
68,358
|
|
|
60,986
|
|
Maintenance
|
34,025
|
|
|
31,414
|
|
|
64,841
|
|
|
60,746
|
|
|
1,389,649
|
|
|
1,305,071
|
|
|
2,725,430
|
|
|
2,609,636
|
|
Operating Income
|
102,700
|
|
|
76,299
|
|
|
135,762
|
|
|
107,898
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
175
|
|
|
159
|
|
|
336
|
|
|
323
|
|
Interest expense
|
(13,403
|
)
|
|
(13,659
|
)
|
|
(26,709
|
)
|
|
(27,164
|
)
|
Miscellaneous, net
|
1,296
|
|
|
50
|
|
|
601
|
|
|
(1,433
|
)
|
|
(11,932
|
)
|
|
(13,450
|
)
|
|
(25,772
|
)
|
|
(28,274
|
)
|
Income before Income Tax Provision
|
90,768
|
|
|
62,849
|
|
|
109,990
|
|
|
79,624
|
|
Income Tax Provision
|
37,101
|
|
|
19,952
|
|
|
43,430
|
|
|
22,722
|
|
Net Income
|
$
|
53,667
|
|
|
$
|
42,897
|
|
|
$
|
66,560
|
|
|
$
|
56,902
|
|
|
|
|
|
|
|
|
|
Weighted-Average Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
57,128,379
|
|
|
56,354,017
|
|
|
57,043,378
|
|
|
56,226,038
|
|
Diluted
|
57,694,691
|
|
|
56,960,738
|
|
|
57,577,373
|
|
|
56,860,095
|
|
Earnings per Common Share
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.94
|
|
|
$
|
0.76
|
|
|
$
|
1.17
|
|
|
$
|
1.01
|
|
Diluted
|
$
|
0.93
|
|
|
$
|
0.75
|
|
|
$
|
1.16
|
|
|
$
|
1.00
|
|
Cash Dividends Declared per Common Share
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Con-way Inc.
Statements of Consolidated Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(Dollars in thousands, except per share data)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net Income
|
$
|
53,667
|
|
|
$
|
42,897
|
|
|
$
|
66,560
|
|
|
$
|
56,902
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(439
|
)
|
|
(182
|
)
|
|
(317
|
)
|
|
258
|
|
Employee benefit plans
|
|
|
|
|
|
|
|
Amortization of net actuarial loss included in net periodic benefit expense or income, net of deferred tax of $756, $1,859, $1,550 and $3,781, respectively
|
1,182
|
|
|
2,907
|
|
|
2,425
|
|
|
5,914
|
|
Amortization of prior service cost or credit included in net periodic benefit expense or income, net of deferred tax of $120, $61, $242 and $122, respectively
|
(190
|
)
|
|
95
|
|
|
(379
|
)
|
|
190
|
|
|
992
|
|
|
3,002
|
|
|
2,046
|
|
|
6,104
|
|
Total Other Comprehensive Income
|
553
|
|
|
2,820
|
|
|
1,729
|
|
|
6,362
|
|
Comprehensive Income
|
$
|
54,220
|
|
|
$
|
45,717
|
|
|
$
|
68,289
|
|
|
$
|
63,264
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Con-way Inc.
Statements of Consolidated Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
Cash and Cash Equivalents, Beginning of Period
|
$
|
484,502
|
|
|
$
|
429,784
|
|
Operating Activities
|
|
|
|
|
|
Net income
|
66,560
|
|
|
56,902
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization, net of accretion
|
120,223
|
|
|
112,774
|
|
Non-cash compensation and employee benefits
|
12,182
|
|
|
18,275
|
|
Increase in deferred income taxes
|
18,708
|
|
|
26,911
|
|
Provision for uncollectible accounts
|
1,402
|
|
|
5,334
|
|
Gain from sales of property and equipment, net
|
(5,375
|
)
|
|
(7,062
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
(119,659
|
)
|
|
(37,987
|
)
|
Prepaid expenses
|
(2,946
|
)
|
|
4,797
|
|
Accounts payable
|
34,658
|
|
|
16,793
|
|
Accrued variable compensation
|
(6,307
|
)
|
|
(33,902
|
)
|
Accrued liabilities, excluding accrued variable compensation and employee benefits
|
32,962
|
|
|
29,570
|
|
Self-insurance accruals
|
5,617
|
|
|
(3,859
|
)
|
Accrued income taxes
|
3,164
|
|
|
(8,358
|
)
|
Employee benefits
|
(39,132
|
)
|
|
(48,286
|
)
|
Other
|
(412
|
)
|
|
3,880
|
|
Net Cash Provided by Operating Activities
|
121,645
|
|
|
135,782
|
|
Investing Activities
|
|
|
|
|
|
Capital expenditures
|
(123,366
|
)
|
|
(129,273
|
)
|
Software expenditures
|
(5,613
|
)
|
|
(3,246
|
)
|
Proceeds from sales of property and equipment
|
22,391
|
|
|
9,965
|
|
Proceeds from sales of marketable securities
|
—
|
|
|
3,200
|
|
Net Cash Used in Investing Activities
|
(106,588
|
)
|
|
(119,354
|
)
|
Financing Activities
|
|
|
|
|
|
Payment of capital leases
|
(6,141
|
)
|
|
(6,373
|
)
|
Net proceeds from (repayment of) short-term borrowings
|
801
|
|
|
(4,698
|
)
|
Payment of debt issuance costs
|
—
|
|
|
(543
|
)
|
Proceeds from exercise of stock options
|
13,573
|
|
|
8,987
|
|
Excess tax benefit from share-based compensation
|
2,413
|
|
|
1,057
|
|
Payments of common dividends
|
(11,413
|
)
|
|
(11,255
|
)
|
Net Cash Used in Financing Activities
|
(767
|
)
|
|
(12,825
|
)
|
Increase in Cash and Cash Equivalents
|
14,290
|
|
|
3,603
|
|
Cash and Cash Equivalents, End of Period
|
$
|
498,792
|
|
|
$
|
433,387
|
|
|
|
|
|
Supplemental Disclosure
|
|
|
|
|
|
Cash paid for income taxes, net
|
$
|
19,169
|
|
|
$
|
3,136
|
|
Cash paid for interest
|
$
|
26,232
|
|
|
$
|
26,516
|
|
Non-cash Investing and Financing Activities
|
|
|
|
|
|
Property, plant and equipment acquired through partial non-monetary exchanges
|
$
|
936
|
|
|
$
|
16,872
|
|
Property, plant and equipment acquired through capital lease
|
$
|
7,233
|
|
|
$
|
—
|
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Con-way Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1.
Principal Accounting Policies
Organization
Con-way Inc. and its consolidated subsidiaries (“Con-way”) provide transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers. Con-way’s business units operate in regional, inter-regional and transcontinental less-than-truckload and full-truckload freight transportation, contract logistics and supply-chain management, multimodal freight brokerage, and trailer manufacturing. As more fully discussed in
Note 3
, “
Segment Reporting
,” for financial reporting purposes, Con-way is divided into
three
reporting segments: Freight, Logistics and Truckload.
Basis of Presentation
These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and Rule 10-01 of Regulation S-X, and should be read in conjunction with Con-way’s
2013
Annual Report on Form 10-K. Accordingly, significant accounting policies and other disclosures normally provided have been reduced or omitted. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary to present fairly Con-way’s financial position, results of operations and cash flows for the periods presented. Results for the interim periods presented are not necessarily indicative of annual results.
Earnings per Share (“EPS”)
Basic EPS is computed by dividing net income by the weighted-average common shares outstanding during the period. Diluted EPS is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands, except per share data)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Numerator:
|
|
|
|
|
|
|
|
Net income
|
$
|
53,667
|
|
|
$
|
42,897
|
|
|
$
|
66,560
|
|
|
$
|
56,902
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
57,128,379
|
|
|
56,354,017
|
|
|
57,043,378
|
|
|
56,226,038
|
|
Stock options and nonvested stock
|
566,312
|
|
|
606,721
|
|
|
533,995
|
|
|
634,057
|
|
|
57,694,691
|
|
|
56,960,738
|
|
|
57,577,373
|
|
|
56,860,095
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share
|
$
|
0.93
|
|
|
$
|
0.75
|
|
|
$
|
1.16
|
|
|
$
|
1.00
|
|
Anti-dilutive stock options excluded from the computation of
diluted EPS
|
499,469
|
|
|
1,119,661
|
|
|
719,958
|
|
|
1,119,661
|
|
Property, Plant and Equipment
Con-way periodically evaluates whether changes in estimated useful lives or salvage values are necessary to ensure that these estimates accurately reflect the economic use of the assets. In response to conditions in the used-trailer market, Con-way Truckload increased the estimated salvage values for certain of its trailers in the fourth quarter of 2013. The effect of the change in estimate decreased depreciation expense and increased operating income by
$1.6 million
and
$3.4 million
for the
second
quarter and
first half
of
2014
, respectively. As a result of this change, net income in the
second
quarter of
2014
increased by
$1.0 million
and basic and diluted EPS increased
$0.02
per share, and in the
first half
of
2014
, net income increased by
$2.1 million
and basic and diluted EPS increased
$0.04
per share.
New Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” This ASU, codified in the “Revenue Recognition” topic of the FASB Accounting Standards Codification, requires revenue to be recognized upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows
arising from these customer contracts. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and can be applied either retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized on the date of adoption. Con-way plans to adopt this standard in the first quarter of 2017. Con-way is currently evaluating the method of application and the potential impact on the financial statements and related disclosures.
2.
Goodwill and Intangible Assets
Goodwill
The following table shows the changes in the gross carrying amounts of goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Logistics
|
|
Truckload
|
|
Corporate and Eliminations
|
|
Total
|
Goodwill
|
$
|
55,888
|
|
|
$
|
464,598
|
|
|
$
|
727
|
|
|
$
|
521,213
|
|
Accumulated impairment losses
|
(48,236
|
)
|
|
(134,813
|
)
|
|
—
|
|
|
(183,049
|
)
|
Balances at December 31, 2012
|
7,652
|
|
|
329,785
|
|
|
727
|
|
|
338,164
|
|
|
|
|
|
|
|
|
|
Change in foreign currency exchange rates
|
(193
|
)
|
|
—
|
|
|
—
|
|
|
(193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
55,695
|
|
|
464,598
|
|
|
727
|
|
|
521,020
|
|
Accumulated impairment losses
|
(48,236
|
)
|
|
(134,813
|
)
|
|
—
|
|
|
(183,049
|
)
|
Balances at December 31, 2013
|
7,459
|
|
|
329,785
|
|
|
727
|
|
|
337,971
|
|
|
|
|
|
|
|
|
|
Change in foreign currency exchange rates
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
55,697
|
|
|
464,598
|
|
|
727
|
|
|
521,022
|
|
Accumulated impairment losses
|
(48,236
|
)
|
|
(134,813
|
)
|
|
—
|
|
|
(183,049
|
)
|
Balances at June 30, 2014
|
$
|
7,461
|
|
|
$
|
329,785
|
|
|
$
|
727
|
|
|
$
|
337,973
|
|
Intangible Assets
Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was
$0.6 million
and
$1.2 million
for the
second
quarter and
first half
of
2014
, respectively, compared to
$0.6 million
and
$1.2 million
for the same periods of
2013
. Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
Customer relationships
|
$
|
23,088
|
|
|
$
|
15,626
|
|
|
$
|
23,088
|
|
|
$
|
14,448
|
|
Con-way's customer-relationship intangible asset relates to the Con-way Truckload business unit. Estimated future amortization expense is presented in the following table:
|
|
|
|
|
(Dollars in thousands)
|
|
Years ending December 31:
|
|
Remaining six months of 2014
|
$
|
1,178
|
|
2015
|
2,356
|
|
2016
|
2,356
|
|
2017
|
1,572
|
|
3.
Segment Reporting
Con-way discloses segment information in the manner in which the business units are organized for making operating decisions, assessing performance and allocating resources. For the periods presented, Con-way is divided into the following
three
reporting segments:
|
|
•
|
Freight
. The Freight segment consists of the operating results of the Con-way Freight business unit, which provides regional, inter-regional and transcontinental less-than-truckload freight services throughout North America.
|
|
|
•
|
Logistics
. The Logistics segment consists of the operating results of the Menlo Logistics ("Menlo") business unit, which develops contract-logistics solutions, including the management of complex distribution networks and supply-chain engineering and consulting, and also provides multimodal freight-brokerage services.
|
|
|
•
|
Truckload.
The Truckload segment consists of the operating results of the Con-way Truckload business unit, which provides asset-based full-truckload freight services throughout North America.
|
Financial Data
Management evaluates segment performance primarily based on revenue and operating income (loss). Accordingly, investment income, interest expense and other non-operating items are not reported in segment results. Corporate expenses are generally allocated based on measurable services provided to each segment, or for general corporate expenses, based on segment revenue. Inter-segment revenue and related operating income (loss) have been eliminated to reconcile to consolidated revenue and operating income. Transactions between segments are generally based on negotiated prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue from External Customers
|
|
|
|
|
|
|
|
Freight
|
$
|
927,942
|
|
|
$
|
881,824
|
|
|
$
|
1,764,271
|
|
|
$
|
1,698,960
|
|
Logistics
|
413,830
|
|
|
353,528
|
|
|
803,202
|
|
|
732,256
|
|
Truckload
|
148,930
|
|
|
144,490
|
|
|
289,527
|
|
|
282,839
|
|
Corporate and Eliminations
|
1,647
|
|
|
1,528
|
|
|
4,192
|
|
|
3,479
|
|
|
$
|
1,492,349
|
|
|
$
|
1,381,370
|
|
|
$
|
2,861,192
|
|
|
$
|
2,717,534
|
|
Revenue from Internal Customers
|
|
|
|
|
|
|
|
|
|
Freight
|
$
|
12,561
|
|
|
$
|
10,451
|
|
|
$
|
24,259
|
|
|
$
|
20,851
|
|
Logistics
|
19,820
|
|
|
16,850
|
|
|
36,813
|
|
|
30,479
|
|
Truckload
|
15,134
|
|
|
17,314
|
|
|
30,547
|
|
|
35,968
|
|
Corporate and Eliminations
|
17,152
|
|
|
16,393
|
|
|
31,542
|
|
|
31,045
|
|
|
$
|
64,667
|
|
|
$
|
61,008
|
|
|
$
|
123,161
|
|
|
$
|
118,343
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
Freight
|
$
|
83,021
|
|
|
$
|
54,689
|
|
|
101,586
|
|
|
70,713
|
|
Logistics
|
6,418
|
|
|
6,039
|
|
|
12,592
|
|
|
12,571
|
|
Truckload
|
13,499
|
|
|
10,873
|
|
|
19,879
|
|
|
20,828
|
|
Corporate and Eliminations
|
(238
|
)
|
|
4,698
|
|
|
1,705
|
|
|
3,786
|
|
|
$
|
102,700
|
|
|
$
|
76,299
|
|
|
$
|
135,762
|
|
|
$
|
107,898
|
|
4.
Fair-Value Measurements
Assets and liabilities reported at fair value are classified in one of the following three levels within the fair-value hierarchy:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
Financial Assets Measured at Fair Value on a Recurring Basis
The following table summarizes the valuation of financial instruments within the fair-value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents
|
$
|
436,871
|
|
|
$
|
73,092
|
|
|
$
|
363,779
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
(Dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash equivalents
|
$
|
441,199
|
|
|
$
|
99,092
|
|
|
$
|
342,107
|
|
|
$
|
—
|
|
Cash equivalents consist of short-term interest-bearing instruments (primarily certificates of deposit, commercial paper and money-market funds) with maturities of three months or less at the date of purchase.
Money-market funds reflect their published net asset value and are classified as Level 1 instruments. Commercial paper and certificates of deposit are generally valued using published interest rates for instruments with similar terms and maturities, and accordingly, are classified as Level 2 instruments. At
June 30, 2014
, the weighted-average remaining maturity of the cash equivalents was less than one month. Based on their short maturities, the carrying amount of the cash equivalents approximates their fair value.
5.
Employee Benefit Plans
In the periods presented, certain employees of Con-way and its subsidiaries in the U.S. were covered under several retirement benefit plans, including defined benefit pension plans, defined contribution retirement plans and a postretirement medical plan. See Note 9, “Employee Benefit Plans,” of Item 8, “Financial Statements and Supplementary Data,” in Con-way’s
2013
Annual Report on Form 10-K for additional information concerning its employee benefit plans.
Defined Benefit Pension Plans
As a result of plan amendments in previous years, no additional benefits accrue under these plans and already-accrued benefits will not be adjusted for future increases in compensation. The following table summarizes the components of net periodic benefit expense (income) for Con-way’s domestic defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Pension Plans
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Interest cost on benefit obligation
|
$
|
18,767
|
|
|
$
|
17,422
|
|
|
$
|
37,638
|
|
|
$
|
35,011
|
|
Expected return on plan assets
|
(23,309
|
)
|
|
(23,005
|
)
|
|
(46,636
|
)
|
|
(45,662
|
)
|
Amortization of actuarial loss
|
2,375
|
|
|
4,486
|
|
|
4,850
|
|
|
9,136
|
|
Amortization of prior-service costs
|
405
|
|
|
417
|
|
|
809
|
|
|
835
|
|
Net periodic benefit income
|
$
|
(1,762
|
)
|
|
$
|
(680
|
)
|
|
$
|
(3,339
|
)
|
|
$
|
(680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified Pension Plans
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Interest cost on benefit obligation
|
$
|
864
|
|
|
$
|
803
|
|
|
$
|
1,726
|
|
|
$
|
1,607
|
|
Amortization of actuarial loss
|
219
|
|
|
280
|
|
|
438
|
|
|
559
|
|
Amortization of prior-service costs
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
Net periodic benefit expense
|
$
|
1,084
|
|
|
$
|
1,085
|
|
|
$
|
2,166
|
|
|
$
|
2,169
|
|
Con-way expects to make contributions of approximately
$140 million
to its qualified pension plans in 2014, including
$29.5 million
contributed through June 2014.
As reported in Con-way's 2013 Annual Report on Form 10-K, the Qualified Pension Plans’ investment strategy was to achieve a mix in investments of approximately
69%
in fixed-income securities and
31%
in equity securities by the end of 2014. As a result of a shift in asset mix to enhance the Plans’ liquidity, the investment strategy is now to achieve a mix in investments of approximately
75%
in fixed-income securities,
24%
in equity securities, and
1%
in cash by the end of 2014.
Defined Contribution Retirement Plans
Con-way’s cost for defined contribution retirement plans was
$14.1 million
and
$27.7 million
in the
second
quarter and
first half
of
2014
, respectively, compared to
$13.9 million
and
$27.2 million
in the same periods of
2013
.
Postretirement Medical Plan
The following table summarizes the components of net periodic benefit expense (income) for the postretirement medical plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Service cost
|
$
|
271
|
|
|
$
|
313
|
|
|
$
|
542
|
|
|
$
|
742
|
|
Interest cost on benefit obligation
|
671
|
|
|
848
|
|
|
1,343
|
|
|
1,739
|
|
Amortization of actuarial gain
|
(656
|
)
|
|
—
|
|
|
(1,313
|
)
|
|
—
|
|
Amortization of prior-service credit
|
(716
|
)
|
|
(263
|
)
|
|
(1,432
|
)
|
|
(526
|
)
|
Net periodic benefit expense (income)
|
$
|
(430
|
)
|
|
$
|
898
|
|
|
$
|
(860
|
)
|
|
$
|
1,955
|
|
6.
Share-Based Compensation
Under terms of its share-based compensation plans, Con-way grants various types of share-based compensation awards to employees and directors. The plans provide for awards in the form of nonvested stock (also known as restricted stock), performance-share plan units, stock options and stock appreciation rights ("SARs"). See Note 10, “Share-Based Compensation,” of Item 8, “Financial Statements and Supplementary Data,” in Con-way’s
2013
Annual Report on Form 10-K for additional information concerning its share-based compensation awards. The following expense was recognized for share-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Salaries, wages and employee benefits
|
$
|
7,646
|
|
|
$
|
5,163
|
|
|
$
|
10,976
|
|
|
$
|
11,194
|
|
Deferred income tax benefit
|
(2,981
|
)
|
|
(2,010
|
)
|
|
(4,280
|
)
|
|
(4,357
|
)
|
Net share-based compensation expense
|
$
|
4,665
|
|
|
$
|
3,153
|
|
|
$
|
6,696
|
|
|
$
|
6,837
|
|
At
June 30, 2014
and
December 31, 2013
, Con-way had recognized accrued liabilities for cash-settled SARs of
$6.0 million
and
$4.3 million
, respectively, using a weighted-average fair value per SAR of
$23.44
and
$15.13
, respectively.
7.
Income Taxes
Con-way's effective tax rates for the
second
quarter and
first half
of
2014
were
40.9%
and
39.5%
, respectively. The effective tax rates for the
second
quarter and
first half
of
2013
were
31.7%
and
28.5%
, respectively. The customary relationship between income tax expense and pretax income was affected by discrete adjustments. The effective tax rates in the second quarter and first half of 2014 included a discrete tax charge of
$0.7 million
and tax benefit of
$0.6 million
, respectively. The effective tax rates in the
second
quarter and
first half
of
2013
included discrete tax benefits of
$3.8 million
and
$7.2 million
, respectively. In the second quarter of 2013, the discrete items primarily related to the expiration of the statute of limitations on uncertain tax positions. The effective tax rate in the first half of 2013 also included a first-quarter benefit for the alternative-fuel tax credits for 2012 that were recognized in the first quarter of 2013 because of a retroactive change to tax laws; this credit is not expected to be available for 2014.
Other accounts receivable in the consolidated balance sheets include income tax receivables of
$3.8 million
and
$10.6 million
at
June 30, 2014
and
December 31, 2013
, respectively.
8.
Commitments and Contingencies
Service Contracts
Con-way has agreements with vendors to provide certain information-technology, administrative and accounting services. The payments under the terms of the agreements are subject to change depending on the quantities and types of services consumed. The contracts also contain provisions that allow Con-way to terminate the contract at any time; however, Con-way would be required to pay fees if termination is for causes other than the failure of the service providers to perform.
California Wage and Hour
Con-way is a defendant in several class-action lawsuits alleging violations of the state of California's wage and hour laws. Plaintiffs allege that Con-way failed to pay certain drivers for all compensable time and that certain other drivers were not provided with required meal breaks and rest breaks. Plaintiffs seek to recover unspecified monetary damages, penalties, interest and attorneys' fees. The two primary cases are Jorge R. Quezada v. Con-way Inc., dba Con-way Freight, (the "Quezada" case), and Jose Alberto Fonseca Pina, et al. v. Con-way Freight Inc., et al. (the "Pina" case). The Quezada case was initially filed in February 2009 in San Mateo County Superior Court, and was removed to the U.S. District Court of California, Northern District. The Pina case was initially filed in November 2009 in Monterey County Superior Court and was removed to the U.S. District Court of California, Northern District. By agreement of the parties, in March 2010, the Pina case and the Quezada case were deemed related and transferred to the same judge. On April 12, 2012, the Court granted plaintiff's request for class certification in the Pina case as to a limited number of issues. On October 15, 2012, the Court granted plaintiffs' request for class certification in the Quezada case and granted summary judgment as to certain issues. The class certification rulings do not address whether Con-way will ultimately be held liable.
Con-way has challenged the certification of the class in both cases, and further contends that plaintiffs' claims are preempted by federal law and not substantiated by the facts. Con-way has denied any liability with respect to these claims and intends to vigorously defend itself in these cases. There are multiple factors that prevent Con-way from being able to estimate the amount of potential loss, if any, in excess of its accrued liability that may result from this matter, including: (1) Con-way is vigorously defending itself and believes that it has a number of meritorious legal defenses; and (2) at this stage in the cases, there are unresolved questions of fact that could be important to the resolution of these matters. Trial was scheduled in the Quezada case for late August, however that date has been adjourned. The parties have been discussing the possibility of a negotiated resolution in the Quezada matter, and have reached certain terms of a tentative settlement, which must still be finalized and then approved by the Court. Con-way believes it has adequately accrued for this matter.
Unclaimed-Property Audits
Con-way is currently being audited by eight states, primarily the State of Delaware, for compliance with unclaimed-property laws. The property subject to review in this audit process generally includes unclaimed securities and unclaimed payments and refunds to employees, shareholders, vendors and customers. State and federal escheat laws generally require companies to report and remit unclaimed property to the states. Con-way believes it has procedures in place to comply with these laws. The audits of Con-way securities and payments were completed in the third quarter of 2013 and the second quarter of 2014, respectively, with no material findings. The remaining audit of refunds will continue into 2015. Given the current stage of the remaining audit, Con-way cannot estimate the amount or range of potential loss.
Other
Con-way is a defendant in various other lawsuits incidental to its businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material effect on Con-way’s financial condition, results of operations or cash flows.
9.
Shareholders' Equity
Accumulated Other Comprehensive Loss
All changes in equity, except those resulting from investments by owners and distributions to owners, are reported in the statements of consolidated comprehensive income. The following is a summary of the components of accumulated other comprehensive loss and the changes in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Foreign Currency Translation Adjustment
|
|
Employee Benefit Plans
|
|
Total
|
Balances at March 31, 2014
|
$
|
(302
|
)
|
|
$
|
(268,053
|
)
|
|
$
|
(268,355
|
)
|
Other comprehensive loss before reclassifications
|
(439
|
)
|
|
—
|
|
|
(439
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
992
|
|
|
992
|
|
Balances at June 30, 2014
|
$
|
(741
|
)
|
|
$
|
(267,061
|
)
|
|
$
|
(267,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Foreign Currency Translation Adjustment
|
|
Employee Benefit Plans
|
|
Total
|
Balances at December 31, 2013
|
$
|
(424
|
)
|
|
$
|
(269,107
|
)
|
|
$
|
(269,531
|
)
|
Other comprehensive loss before reclassifications
|
(317
|
)
|
|
—
|
|
|
(317
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
2,046
|
|
|
2,046
|
|
Balances at June 30, 2014
|
$
|
(741
|
)
|
|
$
|
(267,061
|
)
|
|
$
|
(267,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Foreign Currency Translation Adjustment
|
|
Employee Benefit Plans
|
|
Total
|
Balances at March 31, 2013
|
$
|
(855
|
)
|
|
$
|
(452,064
|
)
|
|
$
|
(452,919
|
)
|
Other comprehensive loss before reclassifications
|
(182
|
)
|
|
—
|
|
|
(182
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
3,002
|
|
|
3,002
|
|
Balances at June 30, 2013
|
$
|
(1,037
|
)
|
|
$
|
(449,062
|
)
|
|
$
|
(450,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Foreign Currency Translation Adjustment
|
|
Employee Benefit Plans
|
|
Total
|
Balances at December 31, 2012
|
$
|
(1,295
|
)
|
|
$
|
(455,166
|
)
|
|
$
|
(456,461
|
)
|
Other comprehensive income before reclassifications
|
258
|
|
|
—
|
|
|
258
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
6,104
|
|
|
6,104
|
|
Balances at June 30, 2013
|
$
|
(1,037
|
)
|
|
$
|
(449,062
|
)
|
|
$
|
(450,099
|
)
|
See
Note 5
, “
Employee Benefit Plans
” for additional information concerning Con-way's employee benefit plans, including amounts reported for net periodic benefit expense.
Common Stock Repurchase Program and Cash Dividend
In June 2014, Con-way's Board of Directors authorized the repurchase of up to
$150 million
in Con-way's common stock in open market transactions from time to time in such amounts as management deems appropriate.
On July 29, 2014, Con-way's Board of Directors increased the dividend to be paid to shareholders. The Board declared an additional cash dividend of
5 cents
per share on common stock, payable on September 12, 2014 to shareholders of record on August 15, 2014. The total dividend payable on September 12, 2014 will be
15 cents
per share.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
Management’s Discussion and Analysis of Financial Condition and Results of Operations (referred to as “Management’s Discussion and Analysis”) is intended to assist in a historical and prospective understanding of Con-way’s financial condition, results of operations and cash flows, including a discussion and analysis of the following:
•
Overview of Business
•
Results of Operations
•
Liquidity and Capital Resources
•
Critical Accounting Policies and Estimates
•
New Accounting Standards
•
Forward-Looking Statements
Overview of Business
Con-way provides transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers. Con-way’s business units operate in regional, inter-regional and transcontinental less-than-truckload and full-truckload freight transportation, contract logistics and supply-chain management, multimodal freight brokerage, and trailer manufacturing. For financial reporting purposes, Con-way is divided into three reporting segments: Freight, Logistics and Truckload.
Con-way Freight primarily transports shipments utilizing a network of freight service centers combined with a fleet of company-operated linehaul and pickup-and-delivery tractors and trailers. Menlo Logistics ("Menlo") manages the logistics functions of its customers and primarily utilizes third-party transportation providers for the movement of customer shipments. Con-way Truckload primarily transports shipments using a fleet of company-operated tractors and trailers.
Con-way's primary business-unit results generally depend on the number, weight and distance of shipments transported, the prices received on those shipments or services and the mix of services provided to customers, as well as the fixed and variable costs incurred by Con-way in providing the services and the ability to manage those costs under changing circumstances. Due to Con-way Freight's relatively high fixed-cost structure, sudden or severe changes in shipment volumes can have a negative impact on management's ability to manage costs.
Con-way’s primary business units are affected by the timing and degree of fluctuations in fuel prices and their ability to recover incremental fuel costs through fuel-surcharge programs and/or cost-recovery mechanisms, as more fully discussed in Item 3, “Quantitative and Qualitative Disclosures About Market Risk – Fuel.”
Results of Operations
The overview below provides a high-level summary of Con-way’s results of operations for the periods presented and is intended to provide context for the remainder of the discussion on reporting segments. Refer to “Reporting Segment Review” below for more complete and detailed discussion and analysis. Except as otherwise specified, period-over-period comparisons throughout “Results of Operations” are between the
second
quarter of
2014
and the
second
quarter of
2013
, and between the
first half
of
2014
and the
first half
of
2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands, except per share data)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue
|
$
|
1,492,349
|
|
|
$
|
1,381,370
|
|
|
$
|
2,861,192
|
|
|
$
|
2,717,534
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
1,389,649
|
|
|
1,305,071
|
|
|
2,725,430
|
|
|
2,609,636
|
|
Operating income
|
102,700
|
|
|
76,299
|
|
|
135,762
|
|
|
107,898
|
|
Other income (expense)
|
(11,932
|
)
|
|
(13,450
|
)
|
|
(25,772
|
)
|
|
(28,274
|
)
|
Income before income tax provision
|
90,768
|
|
|
62,849
|
|
|
109,990
|
|
|
79,624
|
|
Income tax provision
|
37,101
|
|
|
19,952
|
|
|
43,430
|
|
|
22,722
|
|
Net income
|
$
|
53,667
|
|
|
$
|
42,897
|
|
|
$
|
66,560
|
|
|
$
|
56,902
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
$
|
0.93
|
|
|
$
|
0.75
|
|
|
$
|
1.16
|
|
|
$
|
1.00
|
|
Overview
Con-way's consolidated revenue increased
8.0%
in the
second
quarter and
5.3%
in the
first half
of
2014
, primarily due to increased revenue from Logistics and Freight. Revenue at Logistics increased from growth in both warehouse-management and transportation-management services. Revenue at Freight increased primarily from higher revenue per hundredweight.
Con-way's consolidated operating income increased
34.6%
in the
second
quarter of 2014 due to increased operating income at all three reporting segments. For the
first half
of
2014
, operating income increased
25.8%
primarily due to increased operating income at Freight.
Con-way's effective tax rates for the
second
quarter and
first half
of
2014
were
40.9%
and
39.5%
, respectively. The effective tax rates for the
second
quarter and
first half
of
2013
were
31.7%
and
28.5%
, respectively. Both years included discrete tax adjustments that impacted the effective tax rate, as more fully discussed in
Note 7
, “
Income Taxes
,” of Item 1, “Financial Statements.”
Reporting Segment Review
For the discussion and analysis of segment operating results, management utilizes revenue before inter-segment eliminations. Management believes that revenue before inter-segment eliminations, combined with the detailed operating expense information, provides the most meaningful analysis of segment results. Both revenue from external customers and revenue from internal customers are reported in
Note 3
, “
Segment Reporting
,” of Item 1, “Financial Statements.”
Freight
The following table compares operating results, operating margins, and the percentage change in selected operating statistics of the Freight reporting segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue before inter-segment eliminations
|
$
|
940,503
|
|
|
$
|
892,275
|
|
|
$
|
1,788,530
|
|
|
$
|
1,719,811
|
|
|
|
|
|
|
|
|
|
Salaries, wages and employee benefits
|
403,895
|
|
|
400,915
|
|
|
796,266
|
|
|
778,660
|
|
Purchased transportation
|
152,921
|
|
|
152,985
|
|
|
291,495
|
|
|
298,899
|
|
Other operating expenses
|
121,505
|
|
|
111,722
|
|
|
243,120
|
|
|
236,038
|
|
Fuel and fuel-related taxes
|
90,657
|
|
|
93,474
|
|
|
185,737
|
|
|
187,318
|
|
Depreciation and amortization
|
37,742
|
|
|
33,469
|
|
|
74,412
|
|
|
65,853
|
|
Purchased labor
|
13,195
|
|
|
8,667
|
|
|
24,645
|
|
|
12,639
|
|
Rents and leases
|
12,000
|
|
|
12,901
|
|
|
23,312
|
|
|
24,663
|
|
Maintenance
|
25,567
|
|
|
23,453
|
|
|
47,957
|
|
|
45,028
|
|
Total operating expenses
|
857,482
|
|
|
837,586
|
|
|
1,686,944
|
|
|
1,649,098
|
|
Operating income
|
$
|
83,021
|
|
|
$
|
54,689
|
|
|
$
|
101,586
|
|
|
$
|
70,713
|
|
|
|
|
|
|
|
|
|
Operating margin
|
8.8
|
%
|
|
6.1
|
%
|
|
5.7
|
%
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 vs. 2013
|
|
|
|
2014 vs. 2013
|
|
|
Selected Operating Statistics
|
|
|
|
|
|
|
|
Weight per day
|
+1.3
|
%
|
|
|
|
+0.8
|
%
|
|
|
Revenue per hundredweight ("yield")
|
+4.7
|
%
|
|
|
|
+2.9
|
%
|
|
|
Shipments per day
|
-0.9
|
%
|
|
|
|
-2.0
|
%
|
|
|
Weight per shipment
|
+2.3
|
%
|
|
|
|
+2.8
|
%
|
|
|
Freight's revenue increased
5.4%
in the
second
quarter and
4.0%
in the
first half
of
2014
. The
second
-quarter increase was due to a
4.7%
increase in yield and a
1.3%
increase in weight per day, partially offset by a half-day decrease in the number of working days. The increase in weight per day reflects a
2.3%
increase in weight per shipment, partially offset by a
0.9%
decrease in shipments per day. In the
first half
of
2014
, the revenue increase was due to a
2.9%
increase in yield and a
0.8%
increase in weight per day. The increase in weight per day reflects a
2.8%
increase in weight per shipment, partially offset by a
2.0%
decrease in shipments per day. In 2014, the higher yields include increases in base rates and fuel surcharges. Improved yields benefited from revenue-management initiatives intended to improve operating margins and also include the effect of general rate increases. In 2014, the general rate increase was effective on March 31 compared to the prior year, when the general rate increase was effective on June 24, 2013.
Yield excluding fuel surcharges increased 4.1% in the
second
quarter and 2.6% in the
first half
of
2014
. In the
second
quarter, Freight's fuel-surcharge revenue increased to 17.6% of revenue from 17.2% in 2013, and in the
first half
, increased to 17.7% of revenue from 17.5% in 2013. Fuel surcharges are only one part of Con-way Freight's overall rate structure, and the total price that Con-way Freight receives from customers for its services is governed by market forces, as more fully discussed below in Item 3, “Quantitative and Qualitative Disclosures About Market Risk – Fuel.”
Freight's operating income increased
51.8%
in the
second
quarter and
43.7%
in the
first half
of
2014
as a result of higher revenue and an improved operating margin. Operating income benefited from Freight's lane-based pricing and linehaul optimization initiatives, which were implemented over the course of 2013, and recent cost containment initiatives. Severe winter weather during the first quarter of 2014 negatively impacted operating income in the first half of the year.
Expenses for salaries, wages and employee benefits increased
0.7%
in the second quarter due to a 36.8% increase in variable compensation, partially offset by a 0.7% decline in employee benefits. Variable compensation increased primarily due to variations in performance relative to variable-compensation plan targets.
Expenses for salaries, wages and employee benefits increased
2.3%
in the first half of 2014 as a result of increased expenses for employee benefits, salaries and wages (excluding variable compensation), and variable compensation. Employee benefits increased 4.7% primarily due to increased expenses for workers' compensation claims and employee medical benefits. Expenses for salaries and wages (excluding variable compensation) increased 0.7% primarily due to increased mileage-based
wages. Variable compensation increased 27.2% in the first half of 2014. Workers' compensation increased in 2014 due to increases in the number of claims and expense per claim. Employee medical benefits increased in 2014 due to an increase in the expense per claim, partially offset by a decrease in the number of claims. The increased mileage-based wages were primarily due to increased miles driven by company drivers. Variable compensation increased primarily due to variations in performance relative to variable-compensation plan targets. Comparative changes in expenses for salaries, wages and employee benefits were affected by the timing of salary and wage rate increases; in 2014, those increases were effective in July compared to 2013, when the increases were effective in April.
Purchased transportation expense decreased in the first half of
2014
primarily due to decreased third-party miles. The decrease in third-party miles is the result of Con-way Freight's ongoing linehaul optimization initiative.
Other operating expenses increased
8.8%
in the
second
quarter of
2014
primarily due to higher expenses for information-technology services and increased cargo loss and damage claims, partially offset by increased gains from the sale of property. In the
first half
of
2014
, other operating expenses increased
3.0%
primarily due to increased cargo loss and damage claims and higher expenses for information-technology services, partially offset by decreased vehicular claims and increased gains from the sale of property. The increases in information-technology expenses were primarily due to higher costs for electronic onboard technologies and network infrastructure upgrades. Cargo loss and damage claims increased in 2014 primarily due to increases in the cost per claim and the number of claims. Vehicular claims decreased during the first half of 2014 primarily due to a decrease in the cost per claim. In the second quarter of 2014, the sale of an excess property generated a $3.4 million gain.
Expense for fuel and fuel-related taxes decreased
3.0%
in the
second
quarter and
0.8%
in the
first half
of
2014
primarily due to lower fuel consumption as a result of improved miles per gallon.
Depreciation and amortization expense increased
12.8%
in the
second
quarter and
13.0%
in the
first half
of
2014
, primarily due to the replacement of older tractors with newer models. Newer models are more costly due in part to the inclusion of more expensive emissions-control and safety technology.
Purchased labor expense increased
$4.5 million
or
52.2%
in the
second
quarter and
$12.0 million
or
95.0%
in the
first half
of
2014
due to more of this source of labor being used for freight-handling functions.
Logistics
The table below compares operating results and operating margins of the Logistics reporting segment. The table summarizes Logistics’ revenue as well as net revenue (revenue less purchased transportation expense). Transportation-management revenue is attributable to contracts for which Menlo manages the transportation of freight but subcontracts to carriers the actual transportation and delivery of products, which Menlo refers to as purchased transportation. Menlo's management places emphasis on net revenue as a meaningful measure of the relative importance of its principal services since revenue earned on most transportation-management services includes the carriers’ charges to Menlo for transporting the shipments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue before inter-segment eliminations
|
$
|
433,650
|
|
|
$
|
370,378
|
|
|
$
|
840,015
|
|
|
$
|
762,735
|
|
Purchased transportation
|
(246,963
|
)
|
|
(209,008
|
)
|
|
(470,838
|
)
|
|
(444,208
|
)
|
Net revenue
|
186,687
|
|
|
161,370
|
|
|
369,177
|
|
|
318,527
|
|
|
|
|
|
|
|
|
|
Salaries, wages and employee benefits
|
76,068
|
|
|
62,140
|
|
|
146,683
|
|
|
127,470
|
|
Other operating expenses
|
50,535
|
|
|
49,928
|
|
|
101,244
|
|
|
93,468
|
|
Fuel and fuel-related taxes
|
298
|
|
|
171
|
|
|
591
|
|
|
322
|
|
Depreciation and amortization
|
3,071
|
|
|
2,261
|
|
|
5,909
|
|
|
4,464
|
|
Purchased labor
|
27,528
|
|
|
22,882
|
|
|
56,358
|
|
|
44,550
|
|
Rents and leases
|
21,977
|
|
|
17,250
|
|
|
44,137
|
|
|
34,413
|
|
Maintenance
|
792
|
|
|
699
|
|
|
1,663
|
|
|
1,269
|
|
Total operating expenses excluding purchased transportation
|
180,269
|
|
|
155,331
|
|
|
356,585
|
|
|
305,956
|
|
Operating income
|
$
|
6,418
|
|
|
$
|
6,039
|
|
|
$
|
12,592
|
|
|
$
|
12,571
|
|
|
|
|
|
|
|
|
|
Operating margin on revenue
|
1.5
|
%
|
|
1.6
|
%
|
|
1.5
|
%
|
|
1.6
|
%
|
Operating margin on net revenue
|
3.4
|
%
|
|
3.7
|
%
|
|
3.4
|
%
|
|
3.9
|
%
|
Logistics' revenue increased
17.1%
in the
second
quarter of 2014 primarily due to a 20.8% increase in revenue from warehouse-management services and a 15.3% increase in revenue from transportation-management services. In the
first half
of
2014
, Logistics' revenue increased
10.1%
primarily due to a 21.5% increase in revenue from warehouse-management services and a 5.1% increase in revenue from transportation-management services. Increased revenue from warehouse-management and transportation-management are primarily related to new contracts and increased volumes at existing customers, partially offset by termination of certain customer contracts.
Logistics' net revenue increased
15.7%
in the
second
quarter and
15.9%
in the
first half
of
2014
. Growth in net revenue resulted primarily from increased revenue from warehouse-management services. Purchased transportation expense increased by
18.2%
in the
second
quarter and
6.0%
in the
first half
of
2014
as a result of increased revenue from transportation-management services.
Logistics' operating income increased
6.3%
in the
second
quarter and
0.2%
in the
first half
of
2014
. Increased operating income was largely due to increased revenue, partially offset by increased operating expenses. In 2014, Logistics’ operating margin on net revenue decreased slightly due to an increase in the proportion of net revenue earned from warehouse-management services, which generally have a lower margin on net revenue than transportation-management services.
Expenses for salaries, wages and employee benefits increased
22.4%
in the
second
quarter of
2014
due largely to a 16.8% increase in salaries and wages (excluding variable compensation) and a $4.3 million increase in variable compensation. In the
first half
of
2014
, expenses for salaries, wages and employee benefits increased
15.1%
due largely to a 13.1% increase in salaries and wages (excluding variable compensation) and a $4.8 million increase in variable compensation. Salaries and wages (excluding variable compensation) increased primarily due to increased headcount to support new business from warehouse-management services. Variable compensation increased in 2014 based primarily on variations in performance relative to variable-compensation plan targets. There was no variable compensation expense in the second quarter of 2013.
Other operating expenses increased
1.2%
in the
second
quarter and
8.3%
in the
first half
of
2014
primarily due to higher expenses for facilities and other warehouse-related costs and increased information-technology service costs, partially offset by a decline in the provision for uncollectible accounts receivable. Higher expenses for facilities and other warehouse-related costs were incurred to support increased volumes relating to warehouse-management contracts. The increases in information-technology expenses were primarily due to higher costs for network infrastructure and end-user computing upgrades. The decline in the provision for uncollectible accounts receivable was primarily due to a $3.7 million reserve accrued in the second quarter of 2013 that related to a single international customer.
Purchased labor expense increased
20.3%
in the
second
quarter and
26.5%
in the
first half
of
2014
primarily due to several large warehouse-management contracts which began in the third quarter of 2013.
Expenses for rents and leases increased
27.4%
in the
second
quarter and
28.3%
in the
first half
of
2014
primarily due to several large warehouse-management contracts which began in the third quarter of
2013
.
Truckload
The table below compares operating results, operating margins and the percentage change in selected operating statistics of the Truckload reporting segment. The table summarizes the segment’s revenue before inter-segment eliminations, including freight revenue, fuel-surcharge revenue and other non-freight revenue. The table also includes operating income and operating margin excluding fuel-surcharge revenue. Truckload’s management believes these measures are relevant to evaluate its on-going operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Freight revenue
|
$
|
120,754
|
|
|
$
|
120,875
|
|
|
$
|
236,167
|
|
|
$
|
237,155
|
|
Fuel-surcharge revenue
|
36,263
|
|
|
35,876
|
|
|
71,185
|
|
|
71,958
|
|
Other revenue
|
7,047
|
|
|
5,053
|
|
|
12,722
|
|
|
9,694
|
|
Revenue before inter-segment eliminations
|
164,064
|
|
|
161,804
|
|
|
320,074
|
|
|
318,807
|
|
|
|
|
|
|
|
|
|
Salaries, wages and employee benefits
|
51,880
|
|
|
51,660
|
|
|
102,159
|
|
|
101,615
|
|
Purchased transportation
|
16,028
|
|
|
11,374
|
|
|
30,399
|
|
|
21,258
|
|
Other operating expenses
|
15,715
|
|
|
17,417
|
|
|
32,809
|
|
|
33,339
|
|
Fuel and fuel-related taxes
|
39,827
|
|
|
41,874
|
|
|
81,127
|
|
|
85,259
|
|
Depreciation and amortization
|
17,181
|
|
|
18,774
|
|
|
34,331
|
|
|
37,159
|
|
Purchased labor
|
241
|
|
|
285
|
|
|
522
|
|
|
553
|
|
Rents and leases
|
364
|
|
|
386
|
|
|
773
|
|
|
742
|
|
Maintenance
|
9,329
|
|
|
9,161
|
|
|
18,075
|
|
|
18,054
|
|
Total operating expenses
|
150,565
|
|
|
150,931
|
|
|
300,195
|
|
|
297,979
|
|
Operating income
|
$
|
13,499
|
|
|
$
|
10,873
|
|
|
$
|
19,879
|
|
|
$
|
20,828
|
|
|
|
|
|
|
|
|
|
Operating margin on revenue
|
8.2
|
%
|
|
6.7
|
%
|
|
6.2
|
%
|
|
6.5
|
%
|
Operating margin on revenue excluding fuel-surcharge revenue
|
10.6
|
%
|
|
8.6
|
%
|
|
8.0
|
%
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 vs. 2013
|
|
|
|
2014 vs. 2013
|
|
|
Selected Operating Statistics
|
|
|
|
|
|
|
|
Freight revenue per loaded mile
|
+1.4
|
%
|
|
|
|
+0.9
|
%
|
|
|
Loaded miles
|
-1.5
|
%
|
|
|
|
-1.3
|
%
|
|
|
Truckload's revenue increased
1.4%
in the
second
quarter of
2014
primarily due to a
39.5%
or
$2.0 million
increase in other revenue, partially offset by a
0.1%
decrease in freight revenue. Decreased freight revenue is primarily due to a
1.5%
decrease in loaded miles, partially offset by a
1.4%
increase in revenue per loaded mile. In the first half of 2014, Truckload's revenue increased
0.4%
primarily due to a
31.2%
or
$3.0 million
increase in other revenue, partially offset by a decrease of
0.4%
in freight revenue. Decreased freight revenue is primarily due to a
1.3%
decrease in loaded miles, partially offset by a
0.9%
increase in revenue per loaded mile. Increased other revenue includes additional revenue recognized from detention loads and increased logistics revenue. The decreases in loaded miles resulted from lower tractor productivity (as measured by miles per tractor), partially offset by increases in the size of the tractor fleet, which grew as a result of increases in the number of owner-operator units. Lower tractor productivity was due in part to increases in the number of unassigned tractors, which reflects the driver shortage being experienced by the truckload industry.
Truckload's operating income increased
24.2%
in the
second
quarter of
2014
reflecting an increase in revenue. In the
first half
of
2014
, operating income declined due to the severe winter weather experienced during the first quarter of 2014.
Expenses for salaries, wages and employee benefits increased
0.4%
in the
second
quarter and
0.5%
in the
first half
of
2014
primarily due to increased employee benefits, partially offset by decreased salaries and wages (excluding variable compensation). Increased employee benefits reflect higher costs for workers' compensation claims and employee medical benefits. In the second quarter of 2014, workers' compensation claims increased due to an increase in expense per claim, partially offset by a decrease in the number of claims. In the first half of 2014, workers' compensation claims increased primarily due to an increase in expense per claim. In 2014, employee medical benefits increased primarily due to an increase in expense per claim. Salaries and wages (excluding variable compensation) decreased as miles driven by company drivers decreased.
Purchased transportation expense increased
40.9%
in the
second
quarter and
43.0%
in the
first half
of
2014
due to increased miles driven by the owner-operator fleet.
Other operating expenses decreased
9.8%
in the
second
quarter of 2014 primarily due to decreased vehicular costs resulting from decreases in the expense per claim and number of claims. In the first half of 2014, other operating expenses decreased
1.6%
primarily due to increased gains from the sale of retired trailers.
Expenses for fuel and fuel-related taxes decreased
4.9%
in the
second
quarter and
4.8%
in the
first half
of
2014
primarily due to lower fuel consumption from fewer miles driven by company drivers.
Depreciation and amortization expense decreased
8.5%
in the
second
quarter and
7.6%
in the
first half
of
2014
reflecting the change in estimated salvage value of certain trailers. This change in estimate is more fully discussed in
Note 1
, “
Principal Accounting Policies
,” of Item 1, “Financial Statements.”
Corporate and Eliminations
Corporate and Eliminations consists of the operating results of Con-way's trailer manufacturer, certain corporate activities for which the related income or expense was not allocated to other reporting segments, and eliminations. The second quarter of 2013 includes a $5.6 million gain from sales of corporate properties. Other corporate costs include expense or income associated with Con-way's defined benefit pension plans. Con-way expects to incur an estimated $15 million charge in the fourth-quarter of 2014 as the result of the termination of a small defined benefit pension plan. The table below summarizes components of Corporate and Eliminations other than inter-segment revenue eliminations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue before inter-segment eliminations
|
|
|
|
|
|
|
|
Trailer manufacturing
|
$
|
18,799
|
|
|
$
|
17,921
|
|
|
$
|
35,734
|
|
|
$
|
34,524
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
Trailer manufacturing
|
(102
|
)
|
|
(59
|
)
|
|
(129
|
)
|
|
(29
|
)
|
Reinsurance activities
|
(239
|
)
|
|
617
|
|
|
1,648
|
|
|
1,099
|
|
Corporate properties
|
(419
|
)
|
|
4,639
|
|
|
(764
|
)
|
|
4,232
|
|
Other corporate costs
|
522
|
|
|
(499
|
)
|
|
950
|
|
|
(1,516
|
)
|
|
$
|
(238
|
)
|
|
$
|
4,698
|
|
|
$
|
1,705
|
|
|
$
|
3,786
|
|
Liquidity and Capital Resources
Cash and cash equivalents increased to
$498.8 million
at
June 30, 2014
from
$484.5 million
at
December 31, 2013
, as
$121.6 million
provided by operating activities exceeded the
$106.6 million
used in investing activities and
$0.8 million
used in financing activities. Cash
provided by
operating activities reflects adjustments for non-cash items and net income, partially offset by changes in assets and liabilities. Cash
used in
investing activities primarily reflects capital expenditures, partially offset by proceeds from sales of property and equipment. Cash
used in
financing activities primarily reflects the payments of common dividends and capital leases, partially offset by proceeds from exercise of stock options.
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
(Dollars in thousands)
|
2014
|
|
2013
|
Operating Activities
|
|
|
|
Net income
|
$
|
66,560
|
|
|
$
|
56,902
|
|
Non-cash adjustments (1)
|
147,140
|
|
|
156,232
|
|
Changes in assets and liabilities
|
(92,055
|
)
|
|
(77,352
|
)
|
Net Cash Provided by Operating Activities
|
121,645
|
|
|
135,782
|
|
Net Cash Used in Investing Activities
|
(106,588
|
)
|
|
(119,354
|
)
|
Net Cash Used in Financing Activities
|
(767
|
)
|
|
(12,825
|
)
|
Increase in Cash and Cash Equivalents
|
$
|
14,290
|
|
|
$
|
3,603
|
|
(1) “Non-cash adjustments” refer to depreciation, amortization, deferred income taxes, provision for uncollectible accounts, and other non-cash income and expenses.
Operating Activities
The most significant items affecting the comparison of Con-way’s operating cash flows for the periods presented are summarized below:
In the
first half
of
2014
, changes in assets and liabilities used
$14.7 million
more cash, partially offset by
$0.6 million
more cash provided collectively by net income and non-cash adjustments compared to the same prior-year period. Significant comparative changes include receivables, accrued variable compensation, accounts payable and employee benefits.
Receivables and accounts payable collectively used
$85.0 million
during the
first half
of
2014
compared to
$21.2 million
used during the same prior-year period. Variations in receivables were largely due to increased warehouse-management services at Logistics and also increased revenue at Freight. Variations in accounts payable were largely due to increased warehouse-management and transportation-management services at Logistics.
Accrued variable compensation used
$6.3 million
in the
first half
of
2014
, compared to
$33.9 million
used in the same prior-year period. Improved performance relative to variable-compensation plan targets resulted in lower variable-compensation payments and higher expense in the
first half
of 2014 when compared to the same prior-year period.
Accrued income taxes provided $3.2 million in the first six months of 2014, compared to $8.4 million used in the same prior-year period reflecting an increase in the income tax provision, partially offset by higher income tax payments.
Employee benefits used
$39.1 million
in the
first half
of
2014
, compared to
$48.3 million
used in the same prior-year period primarily due to a decrease in benefit payments for long-term disability, a decline in expense for retirement benefits and lower funding contributions to the qualified defined benefit pension plans. In the first half of 2014, Con-way contributed $29.5 million to its qualified pension plans, compared to $31.8 million in the first half of 2013.
Investing Activities
The most significant items affecting the comparison of Con-way’s investing cash flows for the periods presented are summarized below:
Proceeds from sales of property and equipment during the
first half
of
2014
provided
$22.4 million
in cash compared to
$10.0 million
of cash provided in the same prior-year period. Variations are primarily due to increased proceeds from the sale of property and equipment at Truckload and Freight.
Capital expenditures during the
first half
of
2014
used
$123.4 million
in cash compared to
$129.3 million
of cash used in the same prior-year period. Capital expenditures in both periods related primarily to the acquisition of revenue equipment.
Financing Activities
The most significant items affecting the comparison of Con-way’s financing cash flows for the periods presented are summarized below:
Proceeds from the exercise of stock options during the
first half
of 2014 provided
$13.6 million
in cash compared to
$9.0 million
of cash provided in the same prior-year period primarily due to an increase in the market price of Con-way's common stock.
Contractual Cash Obligations
Con-way’s contractual cash obligations as of
December 31, 2013
are summarized in Item 7, “Management’s Discussion and Analysis – Liquidity and Capital Resources – Contractual Cash Obligations,” of Con-way’s
2013
Annual Report on Form 10-K. In the
first half
of
2014
, there have been no material changes in Con-way's contractual obligations outside the ordinary course of business.
Capital Resources and Liquidity Outlook
Con-way’s capital requirements relate primarily to the acquisition of revenue equipment to support growth and/or replacement of older equipment with newer equipment. In funding these capital expenditures and meeting working-capital requirements, Con-way may utilize various sources of liquidity and capital, including cash and cash equivalents, cash flow from operations, credit facilities, and access to capital markets. Con-way may also manage its liquidity requirements and cash-flow generation by varying the timing and amount of capital expenditures.
Con-way has a
$325 million
unsecured revolving credit facility that matures on
June 28, 2018
. The revolving facility is available for cash borrowings and issuance of letters of credit. At
June 30, 2014
, no cash borrowings were outstanding under the credit facility; however,
$106.9 million
of letters of credit were outstanding, leaving
$218.1 million
of available capacity for additional letters of credit or cash borrowings, subject to compliance with financial covenants and other customary conditions of borrowing. At
June 30, 2014
, Con-way was in compliance with the revolving credit facility’s financial covenants and expects to remain in compliance.
Con-way had other uncommitted unsecured credit facilities totaling
$60.5 million
at
June 30, 2014
, which are available to support short-term borrowings, letters of credit, bank guarantees and overdraft facilities. At
June 30, 2014
, Con-way had
$34.9 million
of available capacity under these facilities.
See “Forward-Looking Statements” below and Item 1A, “Risk Factors,” and Note 5, “Debt and Other Financing Arrangements,” of Item 8, “Financial Statements and Supplementary Data,” in Con-way’s
2013
Annual Report on Form 10-K for additional information concerning Con-way's $325 million credit facility.
In
2014
, Con-way anticipates capital and software expenditures of approximately
$275 million
, net of proceeds from asset dispositions, which compares to
$275.1 million
in
2013
. During the
first half
of
2014
, Con-way had
$106.6 million
of capital and software expenditures, net of proceeds from asset dispositions. Con-way’s actual
2014
capital expenditures may differ from the estimated amount depending on factors such as availability and timing of delivery of equipment.
Con-way expects to make contributions of
$140 million
to its qualified pension plans in 2014, which includes additional funding required to terminate a small pension plan. Con-way made actual contributions of $55.3 million in 2013. The increased level of pension funding in 2014 is intended to strengthen Con-way’s balance sheet by reducing its liabilities and is expected to reduce funding requirements in the future. Con-way’s expected 2014 contribution is subject to change based on variations in interest rates, asset return, Pension Protection Act requirements and other factors.
In June 2014, Con-way's Board of Directors authorized the repurchase of up to
$150 million
in Con-way's common stock in open market transactions from time to time in such amounts as management deems appropriate. On July 29, 2014, Con-way's Board of Directors increased the dividend to be paid to shareholders. The Board declared an additional cash dividend of
5 cents
per share on common stock, payable on September 12, 2014 to shareholders of record on August 15, 2014. The total dividend payable on September 12, 2014 will be
15 cents
per share.
At
June 30, 2014
, Con-way’s senior unsecured debt was rated as investment grade by Standard and Poor’s (BBB-), Fitch Ratings (BBB-), and Moody’s (Baa3). Standard and Poor's, Fitch Ratings, and Moody's assigned an outlook of “stable.”
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to adopt accounting policies and make significant judgments and estimates. In many cases, there are alternative policies or estimation techniques that could be used. Con-way maintains a process to evaluate the appropriateness of its accounting policies and estimation techniques, including discussion with and review by the Audit Committee of its Board of Directors and its independent auditors. Accounting policies and estimates may require adjustment based on changing facts and circumstances and actual results could differ from estimates. Con-way believes that the accounting policies that are most judgmental and material to the financial statements are those related to the following:
|
|
•
|
Defined Benefit Pension Plans
|
|
|
•
|
Property, Plant and Equipment and Other Long-Lived Assets
|
|
|
•
|
Self-Insurance Accruals
|
There have been no significant changes to the critical accounting policies and estimates disclosed in Con-way’s
2013
Annual Report on Form 10-K.
New Accounting Standards
Refer to Note 1, “Principal Accounting Policies,” of Item 1, “Financial Statements,” for a discussion of recently issued accounting standards that Con-way has not yet adopted.
Forward-Looking Statements
Certain statements included herein constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to a number of risks and uncertainties, and should not be relied upon as predictions of future events. All statements other than statements of historical fact are forward-looking statements, including:
|
|
•
|
any projections of earnings, revenue, weight, yield, volumes, income or other financial or operating items;
|
|
|
•
|
any statements of the plans, strategies, expectations or objectives of Con-way’s management for future operations or other future items;
|
|
|
•
|
any statements concerning proposed new products or services;
|
|
|
•
|
any statements regarding Con-way’s estimated future contributions to pension plans;
|
|
|
•
|
any statements as to the adequacy of reserves;
|
|
|
•
|
any statements regarding the outcome of any legal and other claims and proceedings that may be brought by or against Con-way;
|
|
|
•
|
any statements regarding future economic conditions or performance;
|
|
|
•
|
any statements regarding strategic acquisitions; and
|
|
|
•
|
any statements of estimates or belief and any statements or assumptions underlying the foregoing.
|
Certain such forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of those terms or other variations of those terms or comparable terminology or by discussions of strategy, plans or intentions. Such forward-looking statements are necessarily dependent on assumptions, data and methods that may be incorrect or imprecise and there can be no assurance that they will be realized. In that regard, certain important factors, among others and in addition to the matters discussed elsewhere in this document and other reports and documents filed by Con-way with the Securities and Exchange Commission, could cause actual results and other matters to differ materially from those discussed in such forward-looking statements. A detailed description of certain of these risk factors is included in Item 1A, “Risk Factors,” of Con-way's
2013
Annual Report on Form 10-K. Any forward-looking statements speak only as of the date the statement is made and are subject to change. Con-way does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.